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Comment by guelo | Hacker News Reader

It is not possible to trust Wall Street, the whole thing is built on insider trading. They call customers that are not on the inside "dumb money" and unashamedly try to figure out how to take their money.

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> It is not possible to trust Wall Street, the whole thing is built on insider trading.

As the old saying goes: If you don't know who the sucker at the table is, it's you.

And sometimes it is still you, even when you think you know otherwise.

Depends on the intelligence of the person and the complexity of the ruse. The most powerful deceptions are those just under our noses.

It's not just Wall Street though. Wasn't it John Doerr that said, "No conflict, no interest"

The "market" is usually caveat emptor - the buyer has to take into consideration how much they trust the seller. On top of that, society has some laws against fraud that make lying more harmful to the seller. That means the buyer can have some amount of faith in the seller. For publicly traded companies, this goes a lot further. The SEC is supposed to create an environment with reasonable auditing and pretty harsh penalties for lying. This is supposed to facilitate a huge amount of business, since all the businesses can trust each other a lot more (when the stakes would otherwise be high enough to attempt fraud). So really the only thing preventing fraud at that scale is the SEC, and if it's compromised in any way, we're kinda doomed.

I was with you right up to the "if"

http://www.rollingstone.com/politics/news/is-the-sec-coverin...

I read an article a few years ago that correlated the desirability to do business in a country with the perceived likelihood of fairness and low corruption in institutions and government. The US was high (possibly first?) in that ranking.

I wonder at what point that starts to change for us?

That may have been something out of the World Bank, the Doing Business team. Sadly the low corruption high fairness perception times are long past - the likes of NZ and Scandinavian countries now dominate the lists. However the US is still the biggest economy, so will continue to attract huge investment. The big alternatives are not scoring highly in low corruption and fairness either.

This is a silly viewpoint. It is silly because it is disempowering; it is admitting defeat before even trying to learn how markets work. Yes, nearly all markets are massively manipulated by those with weight, with the Forex markets being one of the least manipulated because those who would like to manipulate them generally don't have the means to do so.

The important thing to realize is that markets, manipulated or not, are pain optimization machines. They move in ways that maximize psychological distress to to the greatest number of participants, and this happens for sound fundamental reasons based on human psychology, moment to moment supply and demand, and the way in which most people approach a trade-slash-investment. This is often expressed as "markets move because they have to, not because they want to" or "markets move to where the stops are and then reverse". They don't do it because of nefarious secret masters, they do it because that is the natural state of operation of a market.

I strongly recommend reading Mastering the Trade by John Carter - it's one of the best books out there to explain why markets act they way they do in a clear and easily understood way that makes sense to non-traders.

That is a pretty ignorant statement given that earning forecasts are always provided by the company and all Wall St. analysts do (independently from the underwriters) is check market assumptions, company's share of market, cost structure, etc.

Financial guidance, specially at the Net Income level, is ALWAYS the company's call. Who pushed for Facebook's $104bn valuation was current FB shareholders (Accel, DST, etc.), not the underwriters. Do not be that ignorant.

Is it this bad in Europe and Asia? or just in the US? Almost every day we hear banks doing this, banks doing that - most of it is unethical, and many of it probably illegal, yet nothing seems to be happening to them. This is depressing.

Ethics and legality don't always align. You will always find people who are willing to push the ethical line a bit further out to satisfy their greed. Then of course, it's not too much further to meander across that legal line as well.

What can government/regulators do? If they respond harshly and abruptly, they are criticized as being too heavy handed, and enemies of capitalism. If they respond slowly and deliberately, they are called slow and ineffective.

Paraphrasing: If government does the right thing, criminals hate them, and if they do the wrong thing, victims hate them.

What can they do, indeed?

I assure you European banks are just as corrupt as American banks.

Insider trading (and the wider 'market abuse') can be extremely difficult to prove. The FSA fines a handful of people each year, and prosecutes even fewer.

If firms chose not to trade, when they otherwise would have done (which seems to be the case here), based on insider information, that is nigh on impossible to prove.

The agencies who investigate what you describe are understaffed and underfunded, many say intentionally.

Absolutely. The concept of 'diversification' was fabricated to convince 'dumb money holders' to give up more cash. That's the sole purpose of diversification.

"You really need to diversify just a bit more. With as little as 50,000 dollars more, we can expose your portfolio to international rising growth stocks in Asia."

Are you being sarcastic? I genuinely can't tell.

That's the best kind.

For those that might be confused. Diversification is a genuinely useful tool for an investor. Since it is very hard to tell which stock is going to perform well you have to spread your bets. Interesting literature on how to do this dates back to the 1952 paper 'Portfolio Selection' by Markowitz[1].

[1]: http://en.wikipedia.org/wiki/Harry_Markowitz#Selected_public...

>"It is not possible to trust Wall Street, the whole thing is built on insider trading."

And guess where that insider trading starts? With the actual insiders. That is, the people inside the business.

People at Facebook shouldn't be absolved of blame.

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